The GST Council today held a meeting online in order to finalize the method of taxation on full face value for online gaming. After detailed deliberation, the Council decided to levy GST on the initial deposit.
This means that the tax will be only be levied on the contest entry amount and not on every game that a player decides to play.
Talking about taxing on GGR, Finance Minister Nirmala Sitharaman said that it will yield net tax lower than what is generated from essential goods. Due to this the tax levy criteria was decided to be on the full face value.
During the meeting, Goa and Sikkim expressed their concerns on the valuation method for casinos. While both the states were onboard with the 28% GST rate, they wanted it to be imposed on GGR and not on full face value. Delhi, however, wanted a complete relook and the matter to go back to the GoM for further review.
Meanwhile, all the other states were onboard with the decision and wanted to implement it as soon as possible. The Council, hence, decided to bring into force the proposed amendments from October 1, 2023. After six months from implementation, the GST Council will review the situation.
It is to be noted that the implementation date may vary as all the states would also have to amend their GST Act.
Another key announcement made was the registration of offshore gaming companies will be mandatory and a specific provision in the law will be inserted to that effect. A monitoring cell under the Directorate General of GST Intelligence (DGGI) will keep an eye on these companies to check if they are operating without paying taxes.
Today’s GST Council meeting was held less than one month from the previous one on July 11 in which it announced 28% GST on online gaming, casino and horse racing at full face value. The Council, however, failed to decide on the criteria for tax levy using the full face value method.
The July 11 decision created a turmoil in the online gaming industry as the stakeholders wanted the tax to be levied on gross gaming revenue (GGR). Several industry experts had also previously explained why imposing tax on GGR is the best way to ensure the sustenance and growth of the sector.
The online gaming companies have been urging the government to reconsider the proposal as it will lead to the closure of several gaming startups, resulting in job losses and users shifting to illegal offshore gambling platforms. Moreover, it will also impact the inflow of FDI as the sector has been attracting substantial amount of it.
Notably, one of the real money gaming startups Quizy has already announced its exit from the industry due to the changes in tax regulations. How many more will follow suit is anybody’s guess.